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Mortgages for Business

Buy to let risks & borrowing criteria

Property investment can be a very effective way of generating income if managed correctly, however it doesn’t come without its risks.

What risks are involved?

Property investors typically rely on their rental income to repay their mortgage, so if a landlord is unable to secure a tenant and the property is left unoccupied there is a chance they won’t be able to keep up with their mortgage repayments, meaning the property could be repossessed.

A void period is not the only risk that needs to be considered by those looking to go into property investment; major repairs could increase overall costs and of course the housing market on its own can have a huge impact on an investors’ potential profit margin.

What is the borrowing criteria?

Unlike residential mortgages which are calculated on the basis of the applicant’s salary, buy to let mortgages operate differently. The mortgage lender applies a rent to interest (RTI) cover calculation, meaning the borrower must be able to prove they can obtain enough rental income from the tenant to cover the interest on the mortgage.

RTI cover amounts vary between lenders, however the rental income usually has to be 145% of the monthly mortgage repayment for individual applicants and 125% of the monthly mortgage repayments for limited company applicants. A large proportion of lenders also require a minimum income of £25k per annum in addition to the income made from rent.

Like any other mortgage, the borrower must put up a deposit for the property. Currently buy to let mortgages are available up to 85% loan to value (LTV), meaning the borrower would have to put up a deposit of 15%. However, 75% LTV is a more realistically achievable figure.

As far as age restrictions are concerned most buy to let mortgage lenders lending to individuals impose a maximum age of 75 on maturity of the loan, however there are a small selection of specialist lenders that extend this to 85 years, some even higher! When it comes to limited company lending there really is such a thing as NO upper age limit!

Buy to let mortgages for the over 70s

Are buy to let mortgages regulated?

No, unlike domestic residential mortgages, buy to let mortgages are not regulated by the FCA (Financial Conduct Authority). Mortgages for Business is a member of the National Association of Commercial Finance Brokers, a self-regulating body that has a strict code of conduct. If you are unsatisfied with our service, you can contact them to make a formal complaint.

Why use a mortgage broker?

The majority of buy to let mortgages can only be accessed via intermediaries, so you will be limiting your options if you choose to go direct.

When selecting a mortgage broker it is essential to check that they are independent, otherwise you may receive biased advice. As a mortgage broker with access to the whole of market, we are independent of lenders and therefore impartial, so we will be able to use our expertise to recommend the correct mortgage for your financial situation.

At Mortgages for Business we are in the privileged position of being able to access exclusive and semi-exclusive buy to let products that are only available via a limited number of intermediaries including ourselves. In addition, our business volumes often enable us to offer our clients preferential processing treatment by lenders. 

Next: How to buy to let


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